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[flagged] Falsehoods programmers believe about economics (2016) (tive.org)
56 points by zbentley 24 days ago | hide | past | web | favorite | 64 comments

I like these lists, but the ones I like the best are the lists that also provides examples and an explanation with the falsehoods. Pointing out a falsehood without providing a reason does little to change my mind.

Falsehoods about phone numbers was recently on HN [0], and I liked how it came with examples. Then it's possible to have a meaningful discussion about each one, and if it is something we need to handle. For instance Phone numbers are always written in ASCII, gives an example where that isn't true. Then we can discuss if that case is meaningful for us to support or not.

I cannot build a system that will handle all possible names, emails, addresses, timesystems, currencies, locales or whatnot there is a falsehood article about. So when writing an article like this, if you want it to have impact please explain the point of each bullet.

[0]: https://news.ycombinator.com/item?id=19214035

No disrespect, but I think the thought process of your comment is exactly what this post is trying to address.

While falsehood lists that cover emails, phone numbers or CSV files are basically just a much better specification than the one you were following initially, this falsehood list works on a different level. You can't simply go through all the items and make sure your code covers each one. You're supposed to read it and come to a conclusion that economics is less similar to mathematics and more similar to sociology. That it's not a set of rational rules but something inherently more complex and chaotic.

It can still have a huge effect on your code - not in the form of additional corner cases you need to cover, but as questions you may ask yourself about the purpose and morality of your work. At least that's how I understand it.

My reading of the parent comment is that they understand everything you're saying, and their point is that the subject matter is thus a poor fit for the "Falsehoods Programmers Believe" moniker.

The phone number example they gave works very well for demonstrating misconceptions. Economics doesn't work as well for that, for precisely the reason you stated about it being partly sociological. In fact it's sociopolitical, which complicates matters further.

Agreed. It would be nice if the author first explained what they meant by economics being "morally neutral" or "racially neutral" before declaring them falsehoods. For about half of these I can follow along with what the author's saying is false (though still, there's no justitication...). But the rest seem very weaselly or subjective.

Thank you. Though I don't think this is a comprehensive list, it really brings home some of the frustrations when talking to others in tech about economics, particularly getting them to critically examine economic inequality.

Because of the higher pay in our field, many programmers/tech people have the luxury of believing in simplistic economic models, which largely fall back on some economic version of the just-world fallacy(https://en.wikipedia.org/wiki/Just-world_hypothesis). Their most salient datapoint (themselves) fits perfectly into their view, so why bother to complicate it?

That having been said, I'd love to hear/read more on how the conversation can be moved forward with people who stubbornly hold the beliefs mentioned here.

I’m an economist by training. I understand where the author is coming from but most of these points are arguable (and much argued upon) but merely stating these points of contention without explaining why these things are considered true and instead might not be isn't very useful. To a certain extent this text paradoxically reduces economics to sub-Econ101 levels by making a simple list of Apparent Truths That Are Implied To Be Actually False (whose complements therefore are implied to be True, but logically might not be).

There wouldn't be a whole field of well-meaning professionals looking into these matters if it were this simple.

> There wouldn't be a whole field of well-meaning professionals looking into these matters if it were this simple.

I think this list basically an exhortation to think twice before swaggering into a forum thread citing "basic economics" like you've got everything figured out. It's a reminder that things are more complicated.

For that exhortation to be compelling, these "falsehoods" should come with some justification for why they're misconceptions. If you present me with just a list like this for a field as complex as economics, one of two things will probably happen:

1. If I think economics is a simple junk science I won't be inclined to change my mind, because there's no explanation here.

2. If I already think economics is a complex field I'll think this list utterly sucks the nuance out of it.

Economics is mathematically mired by a lack of conserved quantities. Those are global invariants that (particularly in physics) that allow to desume facts about the final configuration of a system based only on the initial configuration (conservation of mass, of energy, of linear or angular momentum... each of which is a handy approximation to solve various problems and that surprisingly depend on the theories one is applying).

In economics even something as fundamental as wealth is not conserved (that's the whole wonderment of nonzero-sum games and interactions in general). That means that predictions are very sensitive to the dynamics one presumes to apply, and the practitioner has no amazing bookkeeping sleights-of-hand to resort to to verify that which one is predicting is defensible.

Not conserving wealth is fundamentally correct in my opinion but you need to keep in mind forms of wealth - it is utility not just raw goods. It also fundamentally isn't universal. As long as there is more useful work to do we can create more wealth.

We are thousands of times wealthier than ancient goat herders and yet do we have ten thousand goats each? No. Wealth has many forms. A full course of antibiotics to treat Hansen's disease would be incredibly valueable miracle cure in medieval times and anyone capable of producing them effectively a miracle worker. A smartphone's in the 1940s is effectively alien nanotech to them.

I agree absolutely. However, utility is typically expressed as a nonlinear function of wealth, and therefore aggregate utility is even less constrained (further from being even approximately conserved) than wealth itself.

This will never stop happening for any given discipline, however, will it? That's why I affixed the preamble that I am “an economist by training” and was very careful to express an opinion (on somebody else's opinions... how typical of economic debate that is! but I digress). In my experience the most terrifying tend to be the cryptocurrency crowd: I deeply respect their technical capacity to create sophisticated distributed crypto systems, but whenever they veer onto discussions about currencies, economies, “fiat”, fractional reserve banking, and so forth I find myself wondering whether they actually know why the system they are casually disrupting is structured as it is (conspiracy theories abound).

> This will never stop happening for any given discipline, however, will it?

No, it won't. However, my experience has been that programmers, for some reason, are much more likely to engage in such behavior. They wade in to a discussion on something technically complex, yet completely out of their wheelhouse, clutching a few cherry-picked academic or pseudo-academic citations, which they then use to argue definitive conclusions on certain points they believe. Someone on this site once referred to discussions where people trade anecdotes on a contentious subject as "anecdote poker"; I would refer to this similar behavior as "citation poker".

> They wade in to a discussion on something technically complex, yet completely out of their wheelhouse, clutching a few cherry-picked academic or pseudo-academic citations, which they then use to argue definitive conclusions on certain points they believe.

I've heard that phenomenon referred to as the "engineer's disease."

I can't easily find any great sources about the term or concept, but these will do:


> November 2003 comment on Crooked Timber (by MeFi's own Martin Wisse?): Engineer’s disease: where just because someone is a (self-proclaimed) expert in field, they think this makes them automatic experts on anything else. Usually people intelligent enough to see through “lies-to-children” [explanations], but not intelligent enough to understand there’s more to their new area of expertise than that. For [some] reason, engineers are particularly susceptible to it.



> As computer programmers, our formative intellectual experience is working with deterministic systems that have been designed by other human beings. These can be very complex, but the complexity is not the kind we find in the natural world. It is ultimately always tractable. Find the right abstractions, and the puzzle box opens before you.

> The feeling of competence, control and delight in discovering a clever twist that solves a difficult problem is what makes being a computer programmer sometimes enjoyable.

> But as anyone who's worked with tech people knows, this intellectual background can also lead to arrogance. People who excel at software design become convinced that they have a unique ability to understand any kind of system at all, from first principles, without prior training, thanks to their superior powers of analysis. Success in the artificially constructed world of software design promotes a dangerous confidence.

I don't know if I agree with a lot of these and I don't know why these falsehoods pertain specifically to programmers and not the general populace.

"People are rational actors." should be number 1 and most of the other points are redundant. Much of this is just behavioral economics à la Kahneman and Tversky.

Correct, you could generalise it further as: people believe economics reflects reality, not that they are simplistic models used to facilitate a political idea.

The only economist I've heard of coming close to creating an all encompassing model is Steve Keen. It was through his work on debt cycles that he called the GFC before it occured.


Economics do reflect reality but not in advance necessarily - granted in that case it is a reflection after reality comes knocking and it is clear that maybe mercantilism was a bad idea after all of their colonies revolted over a lack of representation and misrule bad enough they started doing /better/ economically after severing ties with their large home country. In hindsight that suggests majorly underutilizing the potential of the colony and colonists.

> "People are rational actors." should be number 1 and most of the other points are redundant.

I disagree. The first three points are the most important because they reflect the deepest false assumptions that are most often on display when someone brings up economics around here. To caricature the attitude, imagine someone swaggering in citing "basic supply and demand" to justify some socially harmful action or outcome by saying the laws of physics say a corporation must act that way.

I understand what you're saying but in my opinion the statement "People are NOT rational actors" leads directly to "Economics is NOT simple", "Econ-101 is NOT a comprehensive overview of the field", and "Economics is NOT morally neutral".

But these lists aren't just a list of axioms, from which the corollaries are left as an exercise to the reader.

It's a bit paradoxical and self-referential for a list of supposed Falsehoods to be enunciated and to include “Econ-101 is NOT a comprehensive...” as an item... having further reduced economics to an even lesser level of sophistication.

You're correct, but in the same way that you'd be correct in saying you can derive most of modern mathematics from the axioms of Zermelo–Fraenkel set theory. Textbooks still go through the individual results rather than just stopping at an enumeration of the axioms.

I think the first three points get to the main body of the actual errors many people make in the exact way they make them: overconfidence in their understanding and in their ability to be neutral.

> Pareto efficiency exists.

> Information symmetry exists.

> People are rational actors.

Programmers? Aren't they the falsehoods an ideal theoretical economic model believes about the economy?

Perhaps you could call them, "common misconceptions about economics," but even then it seems a bit subjective. Now that the falsehoods meme has moved past business logic details, I'm waiting for "falsehoods programmers believe about the Republican/Democrat party platform." ;)

No, economic models don't have beliefs. People, including programmers, have beliefs, which may include the belief that reality conforms to a particular economic model.

Information symmetry most definitely does exist insofar as there are situations one can contrive where both parties are equally informed. Therefore it cannot be ruled out tout court by fiat.


the posting from back then, for ref: https://news.ycombinator.com/item?id=12556983

Hugged to death. Outline version: https://outline.com/Fpy4Js

This site is really cool, but it desperately needs a bookmarklet. An extension that adds an "outline" link to hacker news submissions would save me many hours per day. :)

According to: https://www.designernews.co/comments/257987

javascript:(function()%7Bwindow.location.href %3D 'https%3A%2F%2Foutline.com%2F' %2B window.location.href%7D)()

Back in the days of Adam Smith it was known as "political economy", believing the two were inextricable. I should really get round to reading his actual text some time rather than the ideologically filtered popsci versions.

I think that is taken for granted that the assumptions were based upon a state's existence for one. Lack of a state means economic pressures promote the eventual rise of one from either strongmen (influence on goods and their production gained through monopoly on force) or "oligarchs"/ priests (influence on force through goods including intangibles on force).

Being "too useful to destroy" can give an oligarchic or priesthood role. It need not be tangible and is in fact better if it is not because killing them will destroy it instead of stealing it. While thugs could kill a drug cook keeping him alive killing him and taking his drugs would get something of value. Killing an ascetic would get nothing of value - which might be an origin of vows of poverty sticking around.

A "shaman" or who people follow because he can treat illnesses better than nothing and/or has enough of an understanding to avoid diseases has real power even if his etiology is wrong or incomplete.

A belief that boiling water drives out evil spirits (bacteria) or that malaria is caused by evil swamp spirits is somewhat accurate but very imprecise as metaphors with some physical truth. The last especially sounds absurd but lacking microscopy and thus germ theory but makes sense thinking about it. Absent microbiology what else describes invisible forces that can make someone sicken and die and hails from the swamp? While clearly inferior practicallyvl to a more in depth scientific framework which allows for things like a very expensive malaria vaccine derived from dissected mosquitoes literal "spirits" as a framework is outdated but gets some fundamentals of survival right - boil water or you'll be sorry and avoid swamps and mosquitoes.

In terms of rational actor theory, it just means you have preferences and you try to achieve optimal results using all the data available to you. It doesn't matter if your preferences seem irrational or are not apparent to others as long as they are consistent.

Yeah reminds me of one discussion I had about bakeries wanting the right to discriminate based on religion or orientation back in the news. In pure money it is obviously stupid. However if they value the influence or not it is technically "rational".

Paperclip maximizers technically qualify - their goal isn't for them to be useful or even self-preservation but to get the paperclip number as high as possible.

Obnoxious. The other "Falsehoods Programmers Believe" taught me things I didn't know and pointed out mistakes I'd made in the past. This is just a load of patronising progressive preaching which teaches me nothing.

These aren't specifically progressive. I know, because I'm not, and I agree that these are all wrong, at least in their most absolutist form.

Where you get political, subjective, and tend to fall into the next layer of oversimplification is when you use these things as premises... "People are not rational economic actors, therefore..." That's when you get in trouble. (Actually, that's one of my favorites... "People are not rational economic actors, therefore other people's irrational-by-definition choices must be substituted for the original irrational choices." What label you stick on the "other people" doesn't change the fundamental nature of the proposition.)

I'd also add something like "economic jargon does not exist and can be ignored". Both "rational actor" and "efficient market" are often conflated to mean something more like "intelligent and moral actor" and "moral market", neither of which work. What they mean in economics is a more mathematical idea, and is related to the plain English sense of the word, but definitely not strongly enough related that you can substitute the plain English meaning of the word and then proceed to do logic on it, let alone substitute entirely different concepts.

Yeah, over half of them are just plain wrong too lol

Which ones?

3 & 4 are blatantly false. Economics isn't concerned with morality or demographics (beyond the study of their statistical facts). Concerning these, the question should arise: What do these statements even mean?

The Efficient Market Hypothesis has consistently held true, especially in the long term and with respect to indexes and mutual funds. Some of the implications and conclusions drawn from the hypothesis are audacious, but the hypothesis itself is sound. https://www.hindawi.com/journals/ecri/2013/238253/ http://www.ccsenet.org/journal/index.php/ijsp/article/view/1...

Price is absolutely a indication of cost and/or value, at the time of exchange.

Rational Choice Theory is empirically sound https://www.annualreviews.org/doi/abs/10.1146/annurev-soc-07... https://journals.sagepub.com/doi/10.1177/0951692899011002001

Although Classical Economics is empirically shakey is some respects, Neoclassical are not

> 3 & 4 are blatantly false. Economics isn't concerned with morality or demographics (beyond the study of their statistical facts).

I don't think that's correct. Economic theories make statements about the distribution of resources, which is an intensely moral question. They also tend to be tightly wrapped up with political ideology, which makes them even more moral.

Those are implications really - as are political ideologies based upon what people do with it. Similarly demographics are a reflection of current society - it doesn't tell you /why/ it is the case.

Pointing out that the true father may have implications for a family and society but that doesn't make genetics a moral question.

> Those are implications really - as are political ideologies based upon what people do with it.

When programmers talk about economics, they're pretty much always talking about the implications and political ideologies that surround them, not the abstract nuances of some theory for its own sake.

Really appreciate this comment. It's succinct and eloquently states the sentiment I was trying to express.

It isn't though, it's entirely objective.

> It isn't though, it's entirely objective.

That's an extraordinarily strong claim that requires some extraordinary evidence and exposition. When economics intersects with politics, business, laymen, or reality I think it only has pretensions of objectivity.

Subjective conclusions and actions based on objective data do not make the data any less objective.

Did you read your own citations? https://www.hindawi.com/journals/ecri/2013/238253/ presents evidence rejecting even the weak-form EMH.

Falsehoods programmers believe about UX: 1. Blue text on black background is very readable.

I've noticed many programmers have difficulty with nuance and shades of gray on policy or social issues, which are complicated, fuzzy, and irreducible to simple rules. I think this might be a reason why the field has such a strong libertarian presence.

I think "irreducible to simple rules" is really the heart of that. A program is a finite set of rules which are followed consistently and deterministically[1]. Programs are also almost infinitely malleable. Find a bug, fix a bug, it's gone forever[2]. People, societies, and markets have none of these properties. Everyone has their own rules, which they don't even follow consistently, and change is very difficult. People who are drawn toward one kind of reasoning are often literally incapable of the other. How many economists really understand programming[3]? The appeal of Asimov's "psychohistory" to programmers is obvious, but it's fiction. Unfortunately it's fiction that many programmers believe when they try their hand at economics or political science.

[1] Mostly. I could write a whole "falsehoods programmers believe about programming" about the cases where that model doesn't apply.

[2] Again, mostly. Updates take time, old versions persist, etc.

[3] A few, I'm sure, but that doesn't affect the point.

Given the replication crisis is it not more accurate to say that social "scientists" have difficulty understanding data and logic? It's no wonder that programmers who are grounded in both of those can see through the holes in their subjective and feeling driven arguments so often.

I'm a former physical scientist, and I am very critical of statistical practices in the sciences.

Also, biology and biomedicine is just as bad, so don't act like like the super-smart physical scientists are somehow superior. Rigor in social sciences is difficult because there are no solid axioms as there are in physics or math to guide hypotheses.

Folks with your type of opinions act like there are such axioms, but that is just simply wrong. This kind of thinking is exactly what I was talking about in my above comment.

> Folks with your type of opinions act like there are such axioms

No, I agree with you that there are no such axioms which is why the value of social "science" is near zero.

Has this person made a ton of money investing or otherwise deploying their economic theories? If not, then it's likely the falsehoods are on their end.

"Economics is morally neutral."

Of course they are. Unless the author is implying that they are some sort of moral arbiter or religious I'm not sure how they would judge this anyway.

"Economics is racially- and gender-neutral."

Citation needed.

"The efficient markets hypothesis is true."

By all means try to outsmart the market, then come back to us and report your results.

> Has this person made a ton of money investing or otherwise deploying their economic theories?

You do know there's a difference between economics and finance, don't you? You've just illustrated the falsehood of wealth being a measure of worth.

> By all means try to outsmart the market

Even the very strongest forms of EMH allow for arbitrage, and that simplistic fantasy is no longer what most people mean by EMH. More common/reasonable forms of EMH also allow for information delay and asymmetry, so that being able to beat the market has little to do with market "efficiency" as economists use the term.

> Has this person made a ton of money investing or otherwise deploying their economic theories? If not, then it's likely the falsehoods are on their end.

This is a terrible heuristic for deciding if someone understands economics. Economics is far more nuanced than that, and it's very possible to be able to show something non-constructively.

If you truly understand a system you should be able to navigate it successfully. I certainly wouldn't take advice from someone who can't quantifiably show that they know what they're talking about.

That this person can't compile a convincing list with evidence just further shows that they aren't worth listening to.

That assumes no other preconditions apply that would prevent them from taking advantage. Knowing heavier than air flight is possible doesn't allow one to build a 747 on a desert island.

Your confidence is severely out of tune with your knowledge in this field. You can't claim you have any quantifiable knowledge either, since the EMH holds very rarely.

The efficient market hypothesis almost never actually holds. Ask any economist.

Only when regulation stops it from being efficient.

Well, the efficient markets hypothesis is true, just as much as Newton's law of universal gravity is true.

It's perfectly fine to point out its shortcomings, but dismissing it entirely is to throw the proverbial baby out with the bathwater.

The market is generally efficient with pockets of inefficiency due to the cost of information.

From the Wikipedia article on the Grossman-Stiglitz paradox[0], "because information is costly, prices cannot perfectly reflect the information which is available, since if it did, those who spent resources to obtain it would receive no compensation, leading to the conclusion that an informationally efficient market is impossible." (Emphasis mine)

"The rational efficient markets formulation recognizes that investors will not rationally incur the expenses of gathering information unless they expect to be rewarded by higher gross returns compared with the free alternative of accepting the market price. Furthermore, modern theorists recognize that when intrinsic value is difficult to determine, as is the case of common stock, and when trading costs exist, even further room exists for price to diverge from value"


[0] https://en.wikipedia.org/wiki/Grossman-Stiglitz_Paradox

> Well, the efficient markets hypothesis is true, just as much as Newton's law of universal gravity is true.

That's a terrible analogy. Gravity works exactly the same way except in some extremely exotic conditions that none of us will ever experience. The "pockets of inefficiency" in watered-down EMH are so pervasive that we should really be talking about "pockets of efficiency" instead. The physics analogy to EMH would be something like magnetism - a phenomenon that is undoubtedly real and useful, but not really all that common.

Yeah it isn't wrong but I would compare it to frictionless plain physics - it can point in the right direction but it is missing other things and some applications which stray from it and its assumptions can wind up vastly different if you try to take it as gospel but at the same time there are fundamental "can't do thats" predicted. You can't get rich through printing money because that devalues holdings in exchange for more fine grained divisions - fine to have some with economic growth creating corresponding goods.

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